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Charles J. Tabb
University of Illinois College of Law
Champaign, Illinois
Joseph S.U. Bodoff
Hinckley, Allen & Snyder
Boston, Massachusetts
John W. Ames
Greenebaum, Doll & McDonald
Louisville, Kentucky

Eugene J. Chikowski
Becket & Watkins
Malvern, Pennsylvania

Stephen B. Darr
KPMG Peat Marwick, LLP
Boston, Massachusetts

Robert R. Dunn
The Finley Group, Inc.
Charlotte, North Carolina

Jay R. Indyke
Siegel, Sommers & Schwartz
New York, New York

Richard M. Meth
Friedman Siegelbaum LLP
Roseland, New Jersey

John D. Penn
Haynes and Boone, L.L.P.
Forth Worth, Texas

Sandra L. Schirmang
Kraft Foods, Inc.
Northfield, Illinois

Scott E. Blakeley
Blakeley & Brinkman
Los Angeles, California

James A. Chisholm, Jr.
Zimmer, Inc.
Warsaw, Indiana

Michael W. Donovan
Donovan, Love & Twinney
Grand Rapids, Michigan

Robert M. Fishman
Ross and Hardies
Chicago, Illinois

James R. Jensen
Weyerhaeuser Company
Portland, Oregon

Paul F. McIntosh
Collins & Aikman
Spindale, North Carolina

Lisa M. Poulin
KPMG Peat Marwick, LLP
Dallas, Texas

Andrew J. Sutherland
Bank of America Illinois
Chicago, Illinois

John E. Burke
Nestle USA, Inc.
Glendale, California

Loretta R. Cross
Coopers & Lybrand LLP
Houston, Texas

Donald H. Dreyer
Dreyer & Company, Inc.
Oakland, California

Douglas Fox
Rexroth Corporation
Lehigh Valley, Pennsylvania

Harvey R. Kelly
Price Waterhouse LLP
New York, New York

Bruce S. Nathan
Kreindler & Relkin, P.C.
New York, New York

Lloyd B. Sarakin
Sony Electronics, Inc.
Park Ridge, New Jersey

Judy D. Thompson
Poyner & Spruill, L.L.P.
Charlotte, North Carolina

Ann van Bever
Preston, Gates & Ellis
Portland, Oregon

Rodney B. Wheeland
NACM-Oregon, Inc.
Portland, Oregon

To comment on this report, send an e-mail to the ABI at


In May 1995, the Unsecured Trade Creditor Committee of the American Bankruptcy Institute formed a Task Force to study the preference law, in response to concerns raised that some change in the law was warranted. While many supported the concept of recovering certain transfers made shortly before a bankruptcy filing, increasingly, complaints were voiced that the preference law was unfair and should be modified drastically or eliminated completely. Even the most ardent supporters of the preference law expressed the view that some change was mandated. The concerns ranged from claims that the law was not providing for a meaningful redistribution of property, to abuses in the manner in which preference claims were pursued, to claims that the law, through uncertain concepts like "ordinary course of business", fostered unnecessary and expensive litigation. These concerns, in varying degrees, were expressed by trade creditors, lenders and bankruptcy practitioners alike.

The Task Force established a number of goals. Primary among them was to take a fresh look at the preference law to determine whether it serves the traditional purposes of providing an equitable redistribution of property and preventing a race to the courthouse, and, additionally, whether there are other legitimate purposes that the law serves. To the extent that credit providers were unhappy with the preference law, we wanted to explore whether the basis for their sentiments comported with what was occurring in the bankruptcy arena. We also wanted to find out whether there are abuses in the manner that preferences are pursued, the cost of preference litigation and how the preference law affects decisions regarding the extension of credit and the collection of obligations owed by a financially-troubled debtor.

The Task Force first met in August 1995 to begin the long process of putting together two surveys—one of credit providers and the other of bankruptcy practitioners. Several hundred hours of dedicated work were devoted to this project by the 27-member Task Force, which included representatives of the legal, accounting, turnaround and banking communities. The lawyers, accountants and turnaround consultants participating in the project had a diverse range of experience, including the representation of debtors, unsecured creditors, secured creditors and trustees. The goal was to develop two comprehensive, objective and clearly written surveys that would provide useful information to those studying the preference law. A decision was made to focus the credit providers' survey (Survey No.1) on their opinions concerning what payments should be avoidable, their perceptions of the benefits that the law was providing, and the ways in which the preference law affects their credit and collection activities. The practitioners' survey (Survey No.2), by contrast, was designed to elicit information that would provide a picture of what was actually going on in the preference arena, the economics of preference litigation and data concerning some of the more technical provisions of the statute, in addition to eliciting some of the same opinion information as was sought from the credit providers.

The surveys were prepared and the results tabulated with the advice of Louis H. Primavera, Ph.D. and Bernard S. Gorman, Ph.D. and their colleagues at St. John's University Graduate School of Arts and Sciences. Their services were invaluable to the Task Force's efforts.

Twelve hundred members of the National Association of Credit Management and 386 members of the Commercial Finance Association were sent the credit providers' survey, and 1,000 members of the American Bankruptcy Institute were sent the practitioners' survey. The response rate was very good—467 for the credit providers' survey (29.4%) and 356 for the practitioners' survey (35.6%).

The results were analyzed and a report prepared by Professor Charles Jordan Tabb, of the University of Illinois College of Law, in Champaign, Illinois. The Task Force was very fortunate to secure the services of Professor Tabb, whose credentials include the authorship of a law review article titled Rethinking Preferences, the authorship of a soon-to-be-published treatise titled The Law of Bankruptcy, testimony before Congress and participation in working groups of the National Bankruptcy Review Commission, and membership on the Advisory Committee on the Federal Rules of Bankruptcy Procedure. Professsor Tabb's excellent report should be read in conjunction with the accompanying article by Scott E. Blakeley, titled A History of Bankruptcy Preferences.

This project could not have been completed without the devotion of time and energy by the Task Force members, each of whom played a significant role in bringing this project to completion. Heartfelt appreciation goes to each and every one of them for their efforts. Appreciation is also extended to Samuel J. Gerdano, Executive Director of the American Bankruptcy Institute, Professor Robert M. Zinman, President of the American Bankruptcy Institute, and the Honorable Leif M. Clark, an ABI Director, for their sage advice, support and assistance, and to the ABI staff for assisting in the distribution of the surveys and the printing of this report. Special thanks also to my secretary, Lisa Parker for the countless hours she spent providing secretarial assistance for this project.

We are mindful that a single study cannot provide all of the answers. However, we are hopeful that this project will play at least a small part in the ongoing effort to improve our bankruptcy laws and the efficiency of our bankruptcy system.

Joseph S.U. Bodoff, Chair
ABI Task Force On Preferences

May 1997

View Report Here

View Charts Here



    The American Bankruptcy Institute extends its appreciation to the Commercial Finance Association and the National Association of Credit Management for mailing surveys to their membership, and to each of the following organizations for their generous financial contributions:

    Arthur Andersen LLP

    Deloitte & Touche LLP

    Dun & Bradstreet

    Experian, Inc.

    KPMG Peat Marwick, LLP

    Price Waterhouse LLP

    BDO Seidman, LLP

    Coopers & Lybrand LLP

    Ernst & Young LLP

    Mahoney Cohen & Company, CPA, P.C.

    M.R. Weiser & Co. LLP

    National Association of Credit Management

    Thanks also to each of the survey participants for taking the time to complete and return the surveys.

    This project could not have been completed without the support of all of you.


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